The Bhutanese Leading the way.
During the First Sitting of the Joint Sitting of Parliament, Chairperson of the Public Accounts Committee (PAC), Member of Parliament (MP) Dr Jamyang Namgyel, presented the committee’s assessment and findings on the Royal Audit Authority’s (RAA) and follow-up review of the Annual Audit Report 2024-2025.
Under Section 6.1 of the assessment, the PAC found a need to better regulate external funding received by Civil Society Organizations (CSOs), Non-Governmental Organizations (NGOs), Religious Organizations (ROs), and other agencies.
According to the PAC, several CSOs, NGOs, ROs, and even some government-affiliated bodies have been receiving funding directly from international donors. The report stated, “This comes without routing it through, or notifying, the designated regulatory bodies such as the Civil Society Organizations Authority (CSOA) or the MoF.”
While the Civil Society Organisations Act of Bhutan 2007 requires CSOs to be registered and monitored, and the Financial Rules and Regulations (FRR) 2016 require proper accounting and reporting of all funds received, the committee found that “there is currently no formal mechanism to ensure that externally funded programs and grants, especially those received outside budgetary channels, are disclosed, tracked, and audited.”
The report stated, “This gap in oversight creates a significant risk of misuse or misappropriation of funds, a lack of transparency and accountability, and potential funding of activities not aligned with national priorities or security interests.”
The committee further noted that without a formal reporting and monitoring system, the RAA and other oversight agencies do not have complete information on the amount, purpose, and impact of external funding. In some cases, misuse of donor funds was only discovered through later audits or whistle-blower complaints.
To address these concerns, the RAA recommended “the government to mandate all CSOs, NGOs, ROs and autonomous agencies to declare any external funding and its requirement for audit for transparency and accountability.”
The recommendation is aimed at strengthening oversight of external funding, reducing the risk of fund diversion and misuse, ensuring that donor-supported programmes are aligned with national priorities, improving transparency and accountability, and enhancing the credibility of Bhutanese institutions among development partners.
The PAC noted that efforts have already been made to strengthen oversight of external funding received by CSOs. As part of this, the CSOA has developed audit examination and reporting requirements to guide both the RAA and external audit firms in carrying out annual audits of CSOs.
The committee was informed that the guideline was developed following discussions between the CSOA and the RAA in July 2025 and was later reviewed during a tripartite meeting involving the PAC, CSOA, and RAA on 1 May 2026.
According to the committee, the RAA confirmed that the new guideline addresses its concerns regarding the auditing of CSOs and meets the objective of its earlier recommendation. While acknowledging this progress, the PAC recommended that similar audit and reporting mechanisms also be introduced for NGOs and other agencies that receive external funding.
The continuation of this report will be carried out on 15th June 2026.
